Canadian workers are fast becoming hot commodities in a tight labour market and companies are increasingly forced to raise wages to fill jobs — and retain existing staff — a factor likely to complicate the Bank of Canada’s efforts to tame inflation. While fast rising wages have yet to filter through to official data, hiring intentions are far above pre-pandemic levels and staffing companies say it is a “sellers market” for skilled and unskilled job seekers across many industries.

Economists say wage growth could turn into a big problem for the Bank of Canada, which is already grappling with inflation that is near a two-decade high. On October 27, the central bank surprised the market with its hawkish tone, nudging forward the chance of an interest rate hike as it warned inflation would go higher.

“I’m seeing increases in labour wage rates anywhere from 10% to 40%,” said Tanya Cerniuk, head of sales for Canada at global staffing firm Adecco Group. “I saw one today … they were offering $14 an hour and now they’re offering $19.50 per hour,” she said. “Things are changing so quickly. Employers are having to be very agile.”

While Canada’s employment has returned to pre-pandemic levels, wage growth was up 1.7% on the year in September, compared with 4.3% in February 2020, right before the onset of the pandemic, according to Statistics Canada. “If you look at the various wage measures, they’re actually still somewhat below their pre-pandemic levels,” Bank of Canada Governor Tiff Macklem said on October 27. The central bank is watching closely for signs of wage inflation as the headline Consumer Price Index is now expected to be above the 1% — 3% control range until late 2022, he added.

More money, more workers

Some companies, hesitant to boost base wages amid ongoing pandemic-related uncertainty, are instead offering rich signing bonuses and hourly premiums based on attendance and retention, Adecco’s Cerniuk said, all of which may not register as wage increases. Loosening of COVID-19 restrictions has prompted an early start to seasonal hiring for the holidays, pitting retailers and restaurants against manufacturers and warehousing firms to secure workers. Lower immigration during the pandemic has added to the pinch. “I think it’s a perfect storm,” Cerniuk said.

A giant billboard outside an Ottawa liquor store offers seasonal jobs starting about 15% above minimum wage, which is $14.35 an hour in the province of Ontario, while a placard in a nearby Whole Foods store promises hires a $2-C$3 per hour bonus plus richer overtime if they stay on for the entire holiday season.

Derek Holt, head of capital market economics at Scotiabank, pointed to seasonally adjusted and annualized numbers that show a sharp three-month acceleration in wage growth, calling it hard to ignore. “Wage growth is ripping in Canada,” he said in a recent note, adding that it is just the latest pressure point on the central bank.

Source: Financial Post